Google puts ads inside AI Search answers

Alphabet will roll out ads inside its AI Search answers to international markets for the first time, the company announced on its third-quarter earnings call, as growth in its core search advertising business decelerates. Search revenue grew 12 percent year over year this quarter, against 17 percent in the second quarter and 19 percent in the first.

Chief business officer Philipp Schindler said Google is "scaling high-quality ads" within AI overviews and AI Mode to more users and more queries, including multi-turn ad formats. Early results, he claimed, show click-through rates on sponsored product listings in AI Mode comparable to those on organic listings. Total Alphabet revenue came in at $127.6 billion, up 25 percent, while Google Cloud — which includes Workspace subscriptions — surged 103 percent to $30.7 billion, roughly twice Azure's growth rate on a smaller base. Swedish market commentary on the report was blunt: Alphabet "is bleeding more money."

The sequence is worth sitting with. Google's AI summaries were introduced as a convenience and defended as one, despite publishers' complaints that they take the answer and leave the click. The click had a monetisation problem, so the answer now carries the ad. Schindler's own framing — that users find the AI ads "relevant" and that sponsored CTRs match organic ones — concedes the two listings are now interchangeable to the eye that matters, the searcher's.

Sundar Pichai, meanwhile, supplied the demand-side justification: search queries grew at their fastest year-over-year rate in five years, AI Mode queries average three times longer than traditional searches, and one in five AI Mode searches involves voice, images or documents. Google now processes more than 50 billion visual searches per month. Every extra word in a query is inventory; every question answered without a visit to the source website is a transaction Google keeps entirely to itself.

The quarter also brought the release of Gemini 4 Argon, the Gemini app passing one billion monthly users, and the Pixel 11 lineup. Google Services generated $96.3 billion, up 11 percent — the slowest divisional growth in the report.

Search advertising still pays for everything else in the company, and it is the one line decelerating. The fix chosen was to let the sales team into the answer itself.